Brazil Swap Rates Rise to One-Week High as Inflation Accelerates

Brazil’s swap rates climbed to a one-week high as a report indicated that inflation accelerated, adding to speculation that the central bank will keep raising borrowing costs.

Swap rates on contracts maturing in January 2016 increased five basis points, or 0.05 percentage point, to 11.94 percent at close of trade in Sao Paulo, the highest since April 22. The real fell 0.6 percent to 2.2361 per U.S. dollar.

The Getulio Vargas Foundation reported that producer, construction and consumer prices rose 7.98 percent in the 12 months through April 20, the fastest pace in a year. To curb inflation, Brazil has raised its target lending rate nine consecutive times in the past year to 11 percent, the most increases among 49 central banks tracked by Bloomberg.

“There is an expectation for a pickup in inflation in coming months,” Italo Lombardi, an economist at Standard Chartered International, said by phone from New York. “Today’s data is a confirmation of that.”

Economists say consumer prices will increase 6.5 percent in 2014, according to the median of about 100 estimates in a central bank survey published yesterday. That pace is the upper limit of the official target.

The currency gained earlier today as President Dilma Rousseff dropped in a poll ahead of October elections, fueling bets that an administration change could bring policies more favorable for markets, Lombardi said.

Rousseff’s support in a survey by pollster MDA for the National Transport Confederation fell to 37 percent, down from 43.7 percent in February. Senator Aecio Neves had 21.6 percent of support, up from 17 percent.